George Michael Gerstein to present on ERISA at NSCP National Conference

Fiduciary Governance Group Co-Chair George Michael Gerstein will be a panelist at the upcoming National Society of Compliance Professionals’ (NSCP) National Conference in Baltimore. His panel, ERISA: Now and Into the Future, will cover a wide range of key topics, including a litigation update, rollovers and ESG, among others. The conference takes place on October 21-23, with additional registration information available.

New York’s Department of Financial Services reportedly planning to investigate sales of annuities in the 403(b) retirement plan marketplace

What the new Callan survey reveals about ESG adoption in US

Callan recently released its 2019 ESG Survey. I have previously written about their prior surveys. Here are the key takeaways (the findings are from the survey, the analysis and commentary are mine):

  • Respondents (89) were U.S.-based institutional investors, including governmental plans, ERISA plans, endowments and foundations. In other words, this is not an ERISA-specific survey, but nevertheless picks up trends in the DC plan space.
  • Rather strikingly, 62% of respondents that utilized ESG have been doing so for just the past 5 years. This translates to a 91% increase in respondents that have incorporated ESG factors into investment decisions since 2013.
  • Implementation is the most popular ESG approach. Here is my definition of this technique. I expect this trend to continue as the data linking ESG factors to investment performance continues to evolve.
  • Significant uptick in adoption by DB and DC plans (both governmental and ERISA), though their overall numbers continue to lag other investor types. 36% of DC plans offer an ESG option. Only 18% have added a themed fund into the lineup (meaning, DOL Field Assistance Bulletin 2018-01’s discussion around themed funds, particularly the questions raised over whether such funds could serve as QDIAs, may be muted).
  • Noticeable differences between early adopters (before 2015) and recent adopters (2015-2019) in how they have implemented ESG:
    • 64% of the earlies added language to an IPS vs. 39% for the recents (perhaps some of this reflects 2018 DOL guidance that ESG-specific language in an IPS is not necessary?)
    • 57% of the earlies communicated to investment managers that ESG is important vs. 35% of the recents
    • 21% of the earlies utilized shareholder engagement/proxy voting as a method to address ESG vs 13% for the recents (regulatory headwinds could have dented this number a bit, as well)
    • 14% of the earlies added an ESG option to the DC plan lineup vs. 9% of the recents
  • 68% of respondents do not have a distinct ESG allocation apart from its traditional portfolio (this make sense considering integration, which us “under the hood,” is gaining traction).
  • Of recent adopters, 22% use a screening process and 17% have divested.
  • Reasons for incorporating ESG include:
    • Fiduciary responsibility (50% earlies, 57% recents)
    • Improved risk profile (29% earlies vs. 43% recents)
    • To make an impact (29% earlies vs. 17% recents)
    • Higher long-term returns (29% earlies vs. 17% recents)
  • Reasons against ESG incorporation include:
    • Not considering factors that are “not purely financial” in investment decision-making
    • Limited participant interest
    • Perceived political activism
    • Fiduciary duty concerns
    • Perceived as pursuing a moral agenda
    • Not legally required
  • Respondents have interest in seeing greater ESG products for both private equity and real estate, among others.

FINRA adds resources to aid compliance with Regulation Best Interest and Form CRS

Per FINRA press release: “FINRA today announced it has made available new resources to assist member firms in their efforts to comply with the Securities and Exchange Commission (SEC) Regulation Best Interest (Reg BI) and Form CRS by the rules’ compliance date of June 30, 2020. FINRA is assisting members in a variety of ways including by providing a new Reg BI and Form CRS Checklist – available on FINRA’s Reg BI webpage along with a number of other resources – and by hosting several FINRA Reg BI events in the coming months.”

Resources may be available here.